What to expect when applying for a mortgage for the first time

When you buy a new home preconstruction, the builder requires you to provide proof of pre-approval, but this is much different than applying for a mortgage. 

With most banks, getting a pre-approval is as easy as filling out a form with your salary, and a credit check will likely be conducted. It’s important to be honest through this process because you don’t want to end up in a situation where you’ve put a down payment on a home that you don’t actually qualify for. 

So, if you’re a first-time buyer who’s purchased preconstruction, you likely have never gone through the process of applying for a mortgage. Here are a few things you can expect: 

Lots of paperwork 

Your pre-approval was easy, so how hard could applying for a mortgage be? Expect a few extensive forms to fill out, and be ready to provide information about your bank accounts, savings, investments, debt, lines of credit - basically your entire financial situation. You’ll also be asked to provide a couple recent pay stubs, your latest Notice of Assessment, and perhaps a letter from your employer. 

If you’re self-employed, as many younger buyers are these days, this process is even more extensive. Be prepared to provide your T1 generals for the last couple years, as well as your NOAs. The lender may even want to see your business financials for the last two years to ensure your source of income is steady and reliable. 

Dealing with the CRA   

You should probably have your T1s and NOAs on file, but not everyone is this organized. If you don’t have these things on hand, be prepared to be on hold with the Canada Revenue Agency. Fortunately, the CRA’s online platform has improved quite a bit over the last few years. The easiest thing to do is to sign up for My Account. This allows you to view and download recent NOAs and other past tax forms.

Keep in mind that there is still some snail mail involved in the My Account sign-up process. When you register, the CRA will mail you an access code, which will allow you to sign-in using a registered partner (mostly major banks and credit unions). It can take 5-10 business days to receive the access code, but once you have it, you can sign in and easily download all the tax forms your lender requests. 

Negotiations   

Negotiating with a bank or any other lender may sound intimidating because you’re the one asking for a loan, but the fact is, they want your business and will compete to get it. Make sure you shop around for the best mortgage options that fit with your financial goals and strategies, and make sure you print these options out and even get the mortgage specialists you’re working with to initial or sign it. 

It may take a few meetings of going back and forth between two or three lenders, but it will be worth it when you have your mortgage set up in a way that suits your lifestyle. 

All the options

There’s a fixed rate mortgage, variable rate, convertible fixed rate, open fixed rate, 3-year terms, 5-year terms, 10-year terms, annual percentage rates, HELOCs, - it can be overwhelming. Make sure you ask the mortgage specialist all the questions you have so you know which options make sense for you. 

A good place to start is having an idea of how much you can comfortably afford a month to put towards your mortgage payments. If you express this to your lender, they should be able to help guide you in the right direction. 

We hope these tips somewhat help prepare you for the daunting task of applying for a mortgage for the first time!